Saturday, June 26, 2010
A FINRA arbitration panel ordered Goldman Sachs Group to pay $20.6 million (the largest arbitration award against a securities firm) to unsecured creditors of Bayou Group LLC. The claimants alleged Goldman, who acted as clearing broker for Bayou, ignored signs of fraud. The fund's CEO, Samual Israel III, is in prison for fraud. It is extremely rare to impose liability on a clearing broker for the fraud committed by a broker or an issuer. As is customary, the arbitration panel did not give reasons. WSJ, Goldman Told to Pay Bayou Fund Creditors.